Amazon e-book customers wake up to free cash

Book buyers receive credits ranging from 73 cents to more than $100

Book buyers awoke Tuesday morning to find wads of digital cash (or at least some loose change) in their inboxes, windfalls courtesy of publishers’ settlements in an e-book antitrust case.

“Who doesn’t like waking up and finding one-hundred free dollars in their inbox?” Peter Webber, an avid book buyer and film director, said after receiving news of his e-book windfall Tuesday.

There is a catch — or two. The settlement is being dispensed in the form of credits in one’s Amazon
AMZN, -0.11%
or Barnes & Noble
BKS, +0.23%
account, and can only be redeemed at those sites. According to Amazon: “Credits cannot be transferred or redeemed for cash.” Those who bought e-books from Amazon, Barnes & Noble, Apple and Kobo will have money credited to those accounts, while those who bought their books at other — mostly smaller — retailers will receive checks. What’s more, the size of payments are contingent not only on how many e-books were purchased, but how popular they were: Those who bought an e-book between April 1, 2010 and May 21, 2012 get credits of $3.17 for each New York Times best seller, but only $0.73 for non-best sellers, totaling $166 million. (In Minnesota, which reached a separate settlement, consumers receive a credit of $3.93 or $0.94 per e-book.)

The ruling came two years after the U.S. Department of Justice accused Apple and five book publishers of anti-competitive practices; the latest settlement came after state Attorney Generals filed lawsuits seeking refunds for their residents. (Read the settlement here.) “Illegal actions by these publishers forced consumers in New York and across the nation to pay artificially inflated prices for e-books,” New York’s Attorney General Eric Schneiderman said in a statement on Tuesday.

Five publishers settled with the federal government and terminated agreements made with Apple Inc.
AAPL, -0.87%
in 2010, in the weeks before the launch of the first iPad. Those publishers include HarperCollins, Lagardère’s Hachette, CBS’s
CBS, +0.51%
Simon & Schuster, Pearson’s Penguin Group and the Macmillan unit of Georg von Holtzbrinck. (HarperCollins, like MarketWatch, is part of News Corp.
NWSA, -0.47%
) Amazon.com has since cut the prices of e-books. (Apple decided to go to trial and that case continues in the U.S. District Court for the Southern District of New York.)

Amazon is the biggest winner in this, experts say. “Amazon profited from the original sale of the full-priced e-books for which the publishers got in trouble, and now they’re profiting again when consumers redeem the credits,” says Mark Coker, founder of e-book distributor Smashwords.com. (A spokeswoman for Amazon declined to comment.) “This is just feeding Amazon’s growth and market share,” adds Peter Hildick-Smith, president of market researcher Codex Group. Amazon Kindle has over 60% of the U.S. e-book market, he says, “so they will obviously get the lion’s share of the credit spending reimbursed by the settlement fund, while also taking a lot of those book buyers out of the rest of the market for a few weeks.”

Readers are divided on how to spend the credits — on more e-books or print versions. It’s new book release day on Tuesday, says Tyler Cowen, professor of economics at George Mason University and blogger at marginalrevolution.com, and he’d like to go to his local independent book store to see what’s on the table . “I’ve bought a few hundred e-books, usually for airplane reading, but still I prefer physical books.” Cowen, however, would have to spend his $47.49 Amazon credit at Amazon.com. Although he would have liked to have had the choice to buy music or DVDS, Webber says he will return to Amazon to splurge. “I have a filthy book buying habit and like any book junkie I need money to support it,” he says.

Many consumers don’t have enough credit for even one new book, while others may be forced to go online due to the closure of many independent bookstores. Julia Bush, a University of Missouri School of Journalism student, says she will spend her $1.46 rebate on a cup of coffee. Hildick-Smith, who received his own $3.17 Amazon credit on Tuesday, says book access and even fiction-reading has actually declined with the significant loss of physical store book selling space due to Borders Group’s collapse and the reallocation of roughly one-third of bookseller space to non-book merchandise because of competition from Amazon. “Not everyone has the income to buy Kindles for all their kids and Wi-Fi at home,” he adds.

Consumers have largely benefited from the settlement, experts say, at least in the short-term. “Publishers of e-books have lowered the prices of books dramatically,” Cowen says. The average price of best-selling e-books depends on how many self-published titles are on the list. The average price currently hovers at $7.65, up from $5.36 in January, just $0.09 off an all-time low in December 2013, according to DigitalBookWorld.com. Even paper book aficionados are happy. “That suppliers should be punished for cartelizing such a dynamic and rapidly-changing market seems absurd,” Cowen adds. “If people are worried about monopolies they should focus on hospitals and public education.”

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.